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March 31, 2011

Reaction to House Patent Reform Bill

On Wednesday, the House introduced its own version of the "America Invents Act" (H.R. 1249). Although the legislation introduced in the House and the bill that was passed in the Senate earlier this month (S. 23) share the same name, the two bills are not identical (a discussion of the differences between the House and Senate bills can be found here). Since the House bill was introduced, patent organizations, industry groups, and members of the House have begun to line up in support of or opposition to the new legislation.

Earlier today, the Biotechnology Industry Organization (BIO) issued a press release in which BIO president and CEO Jim Greenwood "praise[d] House Judiciary Committee Chairman Lamar Smith (R-TX) for his introduction of a comprehensive patent reform bill similar to the bill adopted by the U.S. Senate earlier this month by a nearly unanimous vote." Mr. Greenwood called the House legislation "a clear improvement over prior House versions of patent reform legislation" (readers may recall that the House passed a patent reform bill in September 2007; see "Patent 'Reform' Bill Passes House of Representatives"). He also noted that BIO was "pleased that the legislation will end, once and for all, the diversion of fees collected by the U.S. Patent and Trademark Office, allowing the agency to use all of its fees to hire more examiners, reduce the backlog of pending applications, and make other improvements to its operations." With regard to the first-inventor-to-file provisions of the House bill, Mr. Greenwood suggested that the inclusion of this and "many other reforms" would "improve the patent system and enhance patent quality."

The biotech industry group was not satisfied with everything in the House version of legislation, however. Mr. Greenwood stated that "BIO has serious concerns with several significant changes made in the House bill regarding the inter partes review system," concluding that:

Taken as a whole, these changes would make it easier to bring frivolous challenges to patents, harder for patent owners to enforce them, and more likely that patent owners will find themselves in duplicative and costly patent-related proceedings. These changes negatively alter the carefully-crafted balance between patent owners and accused infringers that was achieved in the Senate bill -- a bill that won support not only from 95 Senators, but from a wide range of industries, universities, and small businesses across the spectrum of American innovation.

BIO was also concerned about "the inclusion of broader prior user rights in the House bill, and believes that this issue, coupled with the harmful inter partes review changes, could set back efforts to pass meaningful patent reform this year by undermining the broad coalition of American innovators currently supporting patent reform." Noting that small biotech companies rely on IP to attract investment, Mr. Greenwood asserted that "[i]t is critical that patent reform legislation preserves and enhances the incentives necessary to sustain our nation's global leadership in biotechnology innovation and to spur the creation of high-wage, high-value jobs throughout the country."

On Tuesday, nine organizations representing U.S. small businesses, startup entrepreneurs, independent inventors, and technical professionals sent a letter to each member of the House "to clarify [their] objections to the House version of the America Invents Act, in its current form," and highlight "troubling provisions pertaining to matters that are critical to small businesses." The organizations signing onto the letter included the American Innovators for Patent Reform, CONNECT, IEEE-USA, IP Advocate, National Association of Patent Practitioners, National Congress of Inventor Organizations, National Small Business Association, Professional Inventors Alliance USA, and U.S. Business and Industry Council. In their letter, the groups contend that "[t]he proposed Act has several features that will increase our costs sharply and reduce our access to the patent system, increase the Patent Office's delay and backlog, and decrease our ability to enforce our patents" (emphasis in original). Among the bill's problematic features is the first-inventor-to-file provision, which the letter argues will lead to a "weakening of the grace period," which in turn "raises risk of loss of patent rights by our members, as it impedes the important process of incubating and vetting inventions."

The letter suggests that the America Invents Act "limits the grace period to that which is commercially similar to a failed system that the U.S. abandoned in 1839, when the U.S. recognized that inventors need a commercially-reliable opportunity to work and market their inventions before the deadline for patenting." The letter also notes that the "constitutionality of the 'first to file' provision has been questioned among legal scholars," adding that "this complex constitutional legal question and its uncertainty will disrupt investment until it is decided." The groups also expressed "serious concerns" about the post-grant review provision of the House bill, stating that "[i]ncreased filings driven by the Act's 'use it or lose it' grace period rules and by post-grant review will further burden the U.S. Patent & Trademark Office (PTO) at a time when its backlogs are unacceptable." As with their objections to the Senate bill, the groups contend that "[c]hanging U.S. patent law to be like the less-successful patent systems of the rest of the world cannot be regarded as positive 'reform.'" The letter concludes by "urg[ing] Congress to shift its attention away from the broad and technically difficult America Invents Act, and instead pass a streamlined, targeted bill that focuses only on long-term PTO funding."

On Wednesday, two members of the House issued statements in opposition to H.R. 1249. Rep. Don Manzullo (R-IL) (at right) stated that he was "deeply concerned" that the House bill "will stall American innovation and send more of our jobs overseas." He suggested that "[t]his legislation reflects an approach to patent reform that stalled previously, in 2007, in the face of massive opposition from American innovators." Rep. Manzullo called the first-inventor-to-file section "an unfortunate provision that would shift America's current patent system -- where the first person to conceive of an invention is granted a patent -- to a 'first to file' system that would turn our system into a foot race to the Patent Office," and noted that "[t]he Constitution . . . mandates that inventors have exclusive right to their discoveries." As for those who promote harmonization, Rep. Manzullo stated that "[w]ith all due respect to our friends and allies abroad, I would not trade America's record of innovation for that of any of those first-to-file countries." He also suggested that the bill would "devastate small inventors by effectively eliminating the one-year 'grace period' that U.S. inventors currently have," which he said was "critical to small inventors, who can use that year to develop their invention, seek investors and raise funds to begin the expensive patent application process." Rep. Manzullo concluded by noting that "[m]any of America's inventors and innovators are alarmed over these fundamental changes to our patent system," and recommended that "we must hear them out and address their concerns."

Rep. Mike Michaud (D-ME) (at left) also issued a statement in opposition to the House bill, stating that he was "disappointed and concerned with the 'America Invents Act,'" and suggesting that "[p]atent reform should focus on addressing the Patent and Trademark Office's backlog, first, and do no harm, second." He contended that "[a]s introduced, this bill would be bad for American inventors, bad for American manufacturers, and bad for our economy." Rep. Michaud called two of the provisions in the bill "particularly troubling" saying that the post-grant review process and changes to inter partes reexamination would "allow infringers to challenge patents more easily," particularly because "the bill does not include all necessary safeguards to prevent strategic attacks of patents that are often used to the disadvantage of American inventors." He also found fault with the first-inventor-to-file and prior user rights provisions, which would be "particularly problematic for universities, tech startups, and small inventors." Rep. Michaud urged the House Judiciary Committee "to take testimony and input from a broad range of stakeholders so that we can find a better way forward on this important issue."

The Innovation Alliance also issued a press release opposing the House bill. On Wednesday, the group, which represents innovators, patent owners, and stakeholders from a diverse range of industries, said it was "disappointed" that the House bill "does not include some important safeguards against the potential for abuse of the post-grant review procedures at the U.S. Patent and Trademark Office (USPTO)." The group contended that the bill "includes a weak threshold for 'second window' inter partes review proceedings, one that will allow virtually all challenges to proceed to a trial-like hearing before an administrative patent judge," and argued for "a higher threshold . . . to enable the USPTO to manage the increased workload of the new administrative review system fairly and efficiently by screening out meritless or unsubstantiated petitions." The Innovation Alliance also said it was "deeply concerned" that the House bill:

[I]ntroduces new standards that may preclude the enforceability of patents in court and at the International Trade Commission (ITC) pending completion of a post-grant administrative review at the USPTO, lengthens the time period defendants in infringement actions have to decide whether to pursue a post-grant administrative review, expands prior user rights to the detriment of early stage innovation and job growth, and unduly prejudices rights in an overly broad category of so-called 'business method patents' regardless of whether they survive a validity challenge.

The group did find some "positive aspects" in the bill, including "language that would end the diversion of USPTO fees," and create "some critical safeguards against abuse of the new post-grant administrative review system, including 'could have raised' estoppel and a presumption of validity for patents." Notwithstanding the few positives, the Innovation Alliance concluded that it would oppose the America Invents Act absent "significant improvement" in the areas of concern the group raised in its statement.

Comments

There is no such thing as "first-inventor-to-file." There is the inventor and then there are people who recreate the invention. This is non-sense and it is unconstitutional. The constitution does not allow congress to protect the rights of the first person to file for a patent.

That will cure the backlog and any quality problems which are ALL caused by a lack of Examiners, equiptment and staff. Congress has screwed the system up for decades by stealing money. Congress is the problem, not our Patent System.

Forget all other the changes to the Patent System.

We will regret it if we change our System to be like all others. They don't do as wll as we do and are run by Big Companies.

"Congress has screwed the system up for decades by stealing money. Congress is the problem, not our Patent System."

Albert,

I agree with you 100%. Congress created the problems in the examination process by starving the USPTO for funds (through fee diversion going back to 1992). Now that the examination process is bottlenecked due in large part to Congress' misfeasance and malfeasance (if not outright theft), they now want to burden the PTO further with more procedures (e.g., post-grant opposition) that will bring the whole system to a halt. Again, calling this legislation the "America Invents Act" is oxymoronic in the extreme.

Like it or not, we are headed for a first to file system. "Patent Harmonization" was instituted by our government over 20 years ago, and it makes no difference whether it's been a Democratic or Republican administration. Take a look at the changes that have been instituted over the past 20 years. We have incrementally been moving in this direction, and this is one of the final pushes. One should be ready to impelement changes to one's practice to accommodate first to file, because the federal government committed to this change long ago.

The split is clear, as the article indicates:Big business for the most part likes the changes,while small inventors for the most part oppose the changes.
Regardless of where you stand on this debate, it is good to see that the Congress is no longer going to treat the PTO as a profit center and allow them to keep the money it takes in to improve its service.

One might expect the House to be more attentive than the Senate to the needs of independent inventors, but some of the House's provisions indicate the opposite. The next time patent reform comes before Congress, our legislators should do more to solicit the input of independent innovators and other SMEs.http://www.genengnews.com/gen-articles/watson-the-pto-needs-you/3611/

We need to remember that without 4 great inventors america would be just another country instead of an economic leader. All invention spins form them since 1803. The lack of recognition and lack inventor security in this present system is barbaric. Conception needs to be recognized with instant patent grantings with worldwide internet novelty checks by internet and office files for proper inventorship determination. You cant begin development without conception and there is no reason to not record this except to turn the issue into a big fraud argument among the actual inventor and frauds after the fact of divulgment.Inventorship must be derermined in the present not the past as is in the system now. This system shuts down valuable idea patenting due to thefts.